Awarding damages or demanding performance? a performance-oriented approach for international investment law

This paper examines two different approaches to judicial protection of entitlements in international economic law. One of them, ‘performance-oriented’, is applied by WTO adjudicators. Performance-oriented remedies focus on inducing wrongdoers to resume compliance with the underlying substantive rules. The other, ‘reparation-oriented’, is applied overwhelmingly in international investment law. Reparation-oriented remedies aim at offsetting the injury caused to private parties by the wrongful conduct. This paper discusses the utility of performance-oriented remedies within WTO law, and assesses the possibilities for otherwise reparation-oriented investment tribunals to have recourse to these remedies. It examines a number of decisions that, it is argued, favor performance over pecuniary compensation. From the viewpoint of the state found in breach, compensation then appears as a threatened sanction for non-compliance with the performance obligations determined.

R&D investment, international trade, and home market and competitiveness efects

We analyze the effects of R&D investment on international trade. The importance of studying this comes from the fact that one of the most important characteristics of modern industrial organization is that firms try to influence market behavior through strategic variables as R&D. Moreover international competition between firms is, more and more, also centered in R&D competition (besides output and price competition). With this in mind, we develop an oligopolist reciprocal-markets model where firms engage in R&D investment to achieve future reductions in marginal costs. We find ‘home market effects’ at the level of R&D investment, i.e.: firms located in countries that host a higher share of skilled-labor perform higher levels of R&D investment. As consequence, firms in these countries are more competitive than firms in other countries, and as such they can penetrate more easily foreign markets. As result of this ‘competitiveness effect’, countries where these firms are located run trade surplus, while countries where firms perform lower levels of R&D investment incur in trade deficits.

Corporate governance and its influence on the investment decision process of equity market's professionals: An inside view of how corporate governance issues influence the decision-making process of sell-side and buy-side professionals when analyzing Brazilian listed companies

Corporate governance has been in the spotlight for the past two decades, being subject of numerous researches all over the world. Governance is pictured as a broad and diverse theme, evolving through different routes to form distinct systems. This scenario together with 2 types of agency problems (investor vs. management and minorities vs. controlling shareholders) produce different definitions for governance. Usually, studies investigate whether corporate governance structures influence firm performance, and company valuation. This approach implies investors can identify those impacts and later take them into consideration when making investment decisions. However, behavioral finance theory shows that not always investors take rational decisions, and therefore the modus operandi of those professionals needs to be understood. So, this research aimed to investigate to what extent Brazilian corporate governance standards and practices influence the investment decision-making process of equity markets' professionals from the sell-side and buy-side. This exploratory study was carried out through qualitative and quantitative approaches. In the qualitative phase, 8 practitioners were interviewed and 3 dimensions emerged: understanding, pertinence and practice. Based on the interviews’ findings, a questionnaire was formulated and distributed to buy-siders and sell-siders that cover Brazilian stocks. 117 respondents from all over the world contributed to the study. The data obtained were analyzed through structural equation modeling and descriptive statistics. The 3 dimensions became 5 constructs: definition (institutionalized governance, informal governance), pertinence (relevance), practice (valuation process, structured governance assessment) The results of this thesis suggest there is no definitive answer, as the extent to which governance will influence an investment decision process will depend on a number of circumstances which compose the context. The only certainty is the need to present a “corporate governance behavior”, rather than simply establishing rules and regulations at firm and country level.

Investment-specific technological change and the Brazilian macroeconomy

We studied the effects of changes in banking spreads on distributions of income, wealth and consumption as well as the welfare of the economy. This analysis was based on a model of heterogeneous agents with incomplete markets and occupational choice, in which the informality of firms and workers is a relevant transmission channel. The main finding is that reductions in spreads for firms increase the proportion of entrepreneurs and formal workers in the economy, thereby decreasing the size of the informal sector. The effects on inequality, however, are ambiguous and depend on wage dynamics and government transfers. Reductions in spreads for individuals lead to a reduction in inequality indicators at the expense of consumption and aggregate welfare. By calibrating the model to Brazil for the 2003-2012 period, it is possible to find results in line with the recent drop in informality and the wage gap between formal and informal workers.

The determinantss of foreign direct investment distribution among the Brazilian states

O Investimento Estrangeiro Direto (IED) tem desempenhado um papel importante no esforço do Brasil para tornar-se uma economia orientada para o mercado. De 1995 a 2012 o Brasil recebeu $ 511.5 bilhões de dólares em IED. Em 2012, o Brasil foi o segundo país em desenvolvimento que mais recebeu IED e o quarto no mundo (UNCTAD).Devido à concentração geográfica, os estados brasileiros que são consideravelmente menos desenvolvidos e mais pobres, são aqueles que mais precisam de investimentos e que no entanto, não têm sido receptores relevantes de IED. Em 2010, os estados com os maiores estoques de IED foram São Paulo, com 42,3 por cento do total ($ 99,9 bilhões de dólares), Rio de Janeiro com 13,3 por cento ($ 31,4 bilhões de dólares) e Minas Gerais com 10,6 por cento do total ($ 25,1 bilhões de dólares). Como pode ser observado, apenas três dos vinte e sete estados brasileiros receberam cerca de 66 por cento do total de IED destinado ao Brasil.Dada tal diferenciação na distribuição de IED entre os estados brasileiros, o presente estudo busca explicar se o benefício tributário também é determinante para o fluxo de IED, além das demais variáveis já consideradas como determinantes em outros estudos. Dada a limitação de dados, realizamos duas análises econométricas com dados em painel: 1. Usando seis variáveis chaves: tamanho do mercado consumidor, a qualidade da mão de obra, infraestrutura, custo da mão de obra, carga tributária e benefício tributário (por macro regiões), nos anos de 1995, 2000, 2005 and 2010; 2. Usando cinco variáveis: as mesmas do primeiro modelo, excluindo o custo da mão de obra (por falta de dados) e utilizando os dados de benefício tributário por estado, nos anos de 2010, 2011 e 2012.

Private equity regulation: what are the consequences of the alternative investment fund managers directive (AIFMD) on private equity managers?

The recent global financial crisis brought significant regulatory changes in the worldwide financial industry. In Europe and in the alternative asset sector specifically, a new regulation by the name of Alternative Investment Fund Managers Directive saw the daylight in 2010. This far-reaching and complex Directive with the main goal of regulating and overseeing alternative investment funds has triggered many discussions and represents an industry game-changer. Thus, this research will focus on the impact and consequences of the Directive on private equity fund managers and the role of regulators. In other words, what are the effects, what does that mean in a quantitative and qualitative sense, and how is it likely to influence the outlook of this asset class? In order to provide the reader with an extensive view on the topic, the paper will first discuss relevant theory and literature, using mix-methods and legal-dogmatic approaches. Further, descriptive case studies, analysis of existing surveys, and interviews with industry experts will supplement the paper in order to understand primary implications of the Directive with the goal of providing useful insights for further private equity regulation research.

Are returns on Foreign Direct Investment (FDI), FDI determinants?

Foreign Direct Investments (FDI) acquired an important role in the development process of the global economy. FDI inward stock was equivalent to an average of 32% of GDP for OECD countries in 2013. However, FDI affects a country’s Balance of Payments (BoP) in two ways: FDI flows are recorded in the BoP financial account while returns on FDI affect the BoP current account. Therefore, part of the positive contribution of inward FDI to a country on its financial account could be potentially offset by a negative contribution of FDI returns on the current account. The intent of this work is to complement the research on FDI determinants by introducing FDI returns as a variable in a gravity model where bilateral FDI outflows are the dependent variable. Moreover, using outward FDI flows as the dependent variable, the work allows looking at the behavior of Multinational Corporations (MNC) investing abroad. The results show that MNCs repatriate returns generating from the investments they make abroad. This is particularly true when high-income countries are involved: MNCs from high-income countries repatriate returns to their home countries from FDI made anywhere, while MNCs from middle-income countries repatriate returns from FDI in high-income countries. Repatriated returns are a relevant variable determining the value of FDI that a country makes in another country. The information on FDI returns is starting to become available to the public. This allows MNCs to sharpen their investment location decision models and national IPAs to better assess the two-fold BoP effects of promoting FDI.

Asymmetric preferences in investment decisions in the Brazilian financial market

The main objective of this article is to test the hypothesis that utility preferences that incorporate asymmetric reactions between gains and losses generate better results than the classic Von Neumann-Morgenstern utility functions in the Brazilian market. The asymmetric behavior can be computed through the introduction of a disappointment (or loss) aversion coefficient in the classical expected utility function, which increases the impact of losses against gains. The results generated by both traditional and loss aversion utility functions are compared with real data from the Brazilian market regarding stock market participation in the investment portfolio of pension funds and individual investors.

Life expectancy and human capital investment: the arrival of AIDS treatment in Brazil

This paper provides microevidence on the relationship between life expectancy and educational investment decisions. Human capital theory predicts an increase in life expectancy should lead to an augmenting in schooling investment. This paper uses an unique data set on AIDS patients among Brazilian inhabitants in an attempt to estimate the impact of the arrival of Antiretroviral therapy (ART) on educational outcomes. The availability of ART offsets the negative relationship between vertical HIV-transmission and schooling, around 68% and 57% for elementary and high school completion, respectively. Robustness tests indicate the results are not driven by convergence effects.

Chronic disease burden and human capital investment: evidence from the chagas disease campaign in Brazil

We investigate the effects of augmented life expectancy and health improvements on human capital investment, labor supply and fertility decisions. Our main motivation is the prediction of human capital theory that a longer and healthier life encourages educational investment and female labor force participation, while discouraging fertility. To assess the magnitude of these effects, we explore a national campaign against Chagas disease in Brazil as an exogenous source of adult mortality decline and improvement in health conditions. We show that, relative to non-endemic areas, previously endemic regions saw higher increases in educational investment, measured by literacy, school attendance and years of schooling, following the campaign. Additionally, we find that labor force participation increased in high prevalence areas relative to low prevalence ones. Furthermore, we estimate a substantially higher effect on female labor force participation relative to male, suggesting that longevity gains and health improvements affected women's incentives to work, encouraging women to join the labor force. We do not find significant effects on fertility decisions.